Housing allowance and construction of a new home

by Norma Giles
(Robertsdale, Baldwin, AL)

Our pastor has been living in a church-provided parsonage for years.

He is nearing retirement.

This year, he decided to build his own home.

The church will lease out the parsonage or sell it when he moves to his new home.

I know he can exclude from income tax the lesser of 3 amounts. (Amount designated, amount actually spent, or fair rental value including utilities and furnishings).

My question is this: Can the cost of construction, appliances, and furnishings go into the amount actually spent, if he uses his own funds?

What about if he is still living in the parsonage during construction?

Thank you very much!!!

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Housing allowance and new home construction
by: Lewis in NC

This seems to be a catch-22 situation.

Ministers can live in only one house at a time, it seems from what you write that he built the new house this year, while living in the parsonage.

Actual housing expenses can include cost of construction, remodeling, etc., but those amounts have to be approved in the church's approved housing allowance by Dec. 31st in the year prior to when they are applied to the housing allowance.

Another question is who will be approving the housing allowance for this "retired" minister? Is it some umbrella denominational administration?

If it is, my suggestion is for you to coordinate all this through them with proper questions and include IRS in the discussion.

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